Mortgage 101: Should You Use A Mortgage Broker?
Mortgage Brokers: How Do They Benefit Home Buyers?
If you are considering buying a home or have spoken to a real estate agent about home loans then you have probably heard the term “mortgage broker” at some point. A mortgage broker is a financial professional who works as the middle-person between borrowers and lenders. They charge a fee which is paid by either the lender or the borrower and amounts to a percentage of the loan. Their purpose is to work with both sides to help create a loan agreement that satisfies the needs of both parties. Interestingly, the concept of a mortgage broker is not something that all homebuyers are aware of. Here are some reasons why this service might benefit some buyers.
Mortgage Brokers Collect Your Data and Prepare It for Submitting to the Bank
Lenders need their applicants’ supporting documents to be complete and organized, or the borrower risks a declined application. For many buyers, this is often where they fall short. When using a mortgage broker, you provide all of the documents and supporting information required by the lender to the broker first. This will allow him or her to double check that everything is included and organized, after which point, they will submit it to the bank.
Mortgage Brokers Offer a Choice of Lenders
One area where mortgage brokers can be effective is helping their clients find a good deal on their mortgage loan. They’re successful in this regard because of the sheer number of contacts they have to work from. This can be a huge time saver for the buyer, and help them to consider more options that they would have been able to alone. Even better, your broker will handle all of the rate shopping duties for you, which will save you time and effort.In addition, a broker may also be able to provide you with access to special programs that are otherwise unavailable direct to the public. Just be sure to check the mortgage broker’s history so you can be sure that he or she does not favor one or two particular lenders.
Mortgage Broker Fees Are Flexible
Some homebuyers may shy away from using a mortgage broker because they don’t want to take on any added fees or costs before buying their home. What they don’t know is that a broker’s fee can usually be priced into the loan’s interest rate, or into the final closing costs. These flexible options allow you to benefit from a broker’s services without having to spend a lot of money up front. In addition to this, an experienced broker can also occasionally get the lender to waive some of their fees, such as the application, appraisal, or origination fees. This can really help save homebuyers money at closing.
Mortgage Brokers Provide Other Helpful Services to Home Buyers
Along with helping you find the best rate on your loan, a mortgage broker can also help in other ways. For instance, an experienced mortgage broker can help you improve your credit if it’s necessary, and a good broker will help you through the complex escrow process while keeping you abreast of your loan application throughout the entire duration.
What Are the Disadvantages of Using a Broker Versus a Direct Lender?
For many home buyers, a broker makes good sense, but they’re not for everybody. For instance, there can be some disadvantages to using them as well. These can include:
- Loans often take longer to close when a broker is involved
- Not every broker is licensed in all 50 states, whereas most direct lenders are
- Interest rates from direct lenders are just as competitive as those obtained through a broker because they’re all based on the secondary market
- Brokers are subject to the guidelines of the lenders they work with
- You have to pay broker fees on top of the fees being charged by the lender
- Not every broker will work with someone with bad-to-fair credit
Ultimately, whether or not a broker makes sense for you may depend on what you’re looking to achieve. Some homebuyers appreciate the help and support a mortgage broker offers, while others prefer the more simplified, straightforward route of working with a direct lender. The end goal is the same; you just have two roads to choose between in order to get you there.